Building Buzz HOME PRICES WILL DROP 10-20%

New Finder report says recession is imminent, if not already occurring

BY TED M c INTYRE

While the latest rate hike from the Bank of Canada was a mere 25 basis points, a new report from Finder Canada notes that 41% of its experts suggest no increase should have occurred at all.

“Inflation is quickly normalizing, faster than the Bank of Canada expected,” says Taylor Schleich, rates strategist for National Bank of Canada. “There’s mounting evidence that rate hikes are working and the Bank needs to be forward-looking, understanding that effects of earlier hikes haven’t fully been felt by the economy.”

Still, in experts’ minds, rate holds are on the horizon, with just 18% calling for another increase in March and absolutely no one calling for a rate hike in April, while 12% are calling for another hike in June, the report notes.

“We anticipate a pause through 2023 as higher rates curb economic performance and inflation,” explains Bryan Yu, chief economist lecturer at Central 1 Credit Union.

Recession talk dominated in 2022 and speculation that Canada is ripe for an economic downturn doesn’t seem to be abating into 2023. When asked if Canada would go into recession between now and 2025, the majority of experts (78%) anticipated that we would. Onethird (33%) believed we are already in a recession, or on the verge of one in Q1 2023, with another 6% expecting a recession in Q4 2023. The most popular response, from 39% of Finder’s panellists, is that a recession will come at some point in the near future.

The average price of a Canadian home sold in December was $626,318, a year-over-year decline of more than 12%, according to the Canadian Real Estates Association (CREA). When asked what the price action will look like in 2023, every expert on Finder’s panel believes Canada’s real estate market will remain in a macro downtrend for the entirety of 2023, with 77% seeing home prices dropping between 10% and 20% by end of the year compared to November 2022.

Asked if there is anything specific the Bank can do to improve affordability, Finder’s panel indicated that the most effective action hinges almost entirely on interest rates. Holt from Scotiabank says, “(the Bank can) stay the course through tightened monetary policy in order to dampen inflation by reining in interest-sensitive sectors like housing. If it eases up too quickly,